Sept. 29, 2008 - The government's investigation into Cephalon Inc.'s illegal marketing practices that culminated in today's $425,000,000 settlement and guilty plea by the pharmaceutical company began in January 2003 with a Cephalon sales representative in Ohio.

The sales representative, Bruce Boise, refused to follow company-ordered sales strategies to convince doctors to prescribe Cephalon's Actiq, Gabitril and Provigil drugs for unapproved ("off-label') uses because he was worried the sales practices were illegal and the "off-label" uses were dangerous for patients.

Boise was so concerned about Cephalon's off-label marketing that he contacted the Food and Drug Administration (FDA) to inform them of what the company was doing and then agreed to wear a wire to a company sales conference to help the government gather evidence.

The decision to report Cephalon to the FDA cost Boise his job and future employment in the pharmaceutical industry. But his information helped end Cephalon's illegal marketing practices that put patients at risk and led to today's settlement.

Cephalon Inc. (Nasdaq: CEPH), a pharmaceutical company based in Frazer, Pennsylvania, will pay the federal government and numerous states a total of $375 million to settle four "qui tam" (whistleblower) lawsuits alleging Medicare and Medicaid fraud involving the sales and marketing of Actiq, Gabitril and Provigil between 2001 and 2006. At the same time, Cephalon has agreed to plead guilty to a criminal charge involving off-label marketing of the drugs and will pay a $50 million fine.

"What makes this case unique is that it's the first time, in the absence of substantial kickbacks, that the federal government has used the False Claims Act to go after a pharmaceutical company for marketing drugs for off-label indications for which there were no credible published scientific research supporting these drugs' safety or effectiveness," said Peter W. Chatfield, a Washington, DC, attorney whose firm, Phillips & Cohen LLP, represents Boise. "Not only were these uses marketed by Cephalon not approved by the FDA, there was absolutely no literature published in any medical compendia that supported them."

The FDA approves drugs for specific uses, which are noted in the drugs' labeling. Doctors may prescribe those drugs for other "off-label" therapeutic uses, but the law prohibits drug companies from promoting drugs for uses beyond those found to be safe and effective by the FDA.

While Medicare, Medicaid and other federally funded healthcare programs often will pay for off-label use of drugs supported by credible medical research and prescribed based on the medical judgment of physicians, Cephalon's marketing efforts pushed well beyond those constraints.

Cephalon's off-label sales strategies were very effective. The government's investigation found that more than 80 percent of the sales of Provigil, Gabitril and Actiq were for off-label uses.

The FDA approved the use of Provigil to help keep awake patients with certain disorders, such as sleep apnea or shift-work sleep disorder. To boost sales, Cephalon marketed Provigil for off-label uses including fatigue associated with mental illnesses, such as schizophrenia, and children with attention deficit hyperactivity disorder, according to Boise's lawsuit.

Gabitril was approved for the treatment of partial seizures in epileptic patients. Yet Cephalon was pushing doctors to prescribe it for anxiety and insomnia, Boise's lawsuit said.

The most dangerous Cephalon drug when used for "off-label" uses is Actiq, an opioid that is approved only to treat cancer patients when their usual pain medication doesn't control "breakthrough" episodes of extreme pain. The potential side effects of Actiq include nausea, dizziness and respiratory depression, which can be life-threatening.

Boise's lawsuit says that Cephalon decided to increase Actiq's sales by marketing it for general pain treatment to internists and general practitioners - doctors who usually aren't as familiar as oncologists are with the potential dangers associated with using a prescription narcotic such as Actiq.

Boise was the first to report Cephalon's off-label marketing practices to the federal government and played a key role in the investigation. Only after he was fired and found it impossible to secure new employment in the industry because he had been blackballed did he seek counsel to file a lawsuit under the False Claims Act. The whistleblower law allows private citizens to sue companies defrauding the government and receive a reward. But by the time he hired a lawyer to represent him, nearly two years had passed since he first contacted the FDA.

In the interim, two other whistleblowers filed qui tam lawsuits making similar allegations nine months after Boise had provided extensive information to the FDA and reported Cephalon to the FDA. After he learned about the False Claims Act, Boise contacted Phillips & Cohen, which filed his qui tam lawsuit in federal district court in Philadelphia, Pennsylvania, in September 2004 on behalf of the federal government and a dozen states with similar false claims statutes. A fourth whistleblower filed a qui tam lawsuit one week later.

Today's settlement covers all four whistleblower lawsuits. The whistleblowers will receive a reward totaling $46 million for their information and the work on the case they did with their attorneys on the federal case and roughly an additional $11 million for the state cases.

"Bruce Boise sacrificed a lot to protect patients across this country," attorney Chatfield said. "But he found Cephalon's practices to be so outrageous and dangerous that he has no regrets about going to the FDA despite suffering more personal hardship than any whistleblower I have ever represented."

Chatfield praised the work of Assistant U.S. Attorney Marilyn S. May of the Eastern District of Pennsylvania and William C. Gambrell Jr. of South Carolina's Medicaid Fraud Control Unit, who coordinated the efforts of the states to evaluate losses to the Medicaid program.

Phillips & Cohen is the largest and most successful law firm that specializes exclusively in representing whistleblowers nationwide in qui tam and tax fraud cases. For more information about Phillips & Cohen's record, see P&C's Successful Whistleblower Cases.

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